Russian Billionaire's Alfa Group Sued In Federal Court

A federal racketeering lawsuit was filed in New York's Southern District late Thursday by a mutual fund company that is fighting with a Russian oligarchal group over a disputed stake in a Russian mobile phone company. The IPOC International Growth Fund alleges that Alfa Group, controlled by Mikhail Fridman, engaged in a vast international money-laundering and fraud scheme in an attempt to take control of the Russian cellular industry.

Bermuda-based IPOC--which according to its Web site is overseen by Mads Braemer-Jensen, a former Arthur Andersen employee who has worked in Russia the last 10 years--alleges that Alfa, in a series of sham transactions over a 10-day period in 2003, knowingly and fraudulently colluded to steal IPOC's 25.1% stake in MegaFon, a national mobile operator now worth $1.7 billion.

In August of 2003, according to the suit, Alfa bought the Megafon stake through a clump of offshore companies for $295 million. In the same year, Alfa paid entrepreneur Leonid Rozhetskin $200 million for LV Finance, a British Virgin Islands-domiciled firm with Moscow offices. Ipoc contends that LV Finance sold it options to buy other companies that owned the disputed Megafon stake in 2001. "IPOC discovered that LV Finance, acting through its chairman Leonid Rozhetskin, had negotiated a purported sale of LV Finance's interest in MegaFon to Mikhail Fridman's Alfa Group, involving a complex web of nine offshore companies," says IPOC.

"Both companies are alleged to have been aware of IPOC's prior ownership rights, but rode roughshod over the agreement and fraudulently colluded to sell the same stake twice. They 'bought' and 'sold' the $50 million stake, and yet there is no evidence of money having changed hands throughout this daisy chain of sham transactions," IPOC adds. It accuses Fridman of conspiring with Rozhetskin to steal IPOC's interest through money laundering, bribery, wire fraud and other criminal wrongdoings.

Many see a lack of transparency on both sides of the lawsuit. In May, a Zurich tribunal ruled that Russia's Information Technology and Communications Minister Leonid Reiman was IPOC's ultimate owner, and had sourced money illegally to make downpayments on a stake in MegaFon. Reiman recently told Forbes in an interview that "there is no basis" for such claims, and has repeatedly denied any wrongdoing.

The tug-of-war over the 25% stake has taken the two adversaries to courts in Bermuda, the Bahamas, Switzerland and Russia; this the first U.S. suit related to the conflict.

Alfa Group Consortium controls major international corporations traded in the U.S., including Big Board-listed
Vimpel Communications
--Russia's second largest mobile telecoms company--and Nasdaq-listed
Golden Telecom
. MegaFon shareholders are said to be anxious to resolve the dispute so that the mobile operator, which is currently private, can be listed publicly.